In this piece in the New Yorker, the author describes the inception in the late 1980s of the carbon-offsetting market, which emerged from the notion that carbon was a fungible commodity, like coffee or cotton. A U.S. power company had “conceived a novel way to reduce emissions: it could surround its main coal-fired power station with a forest, to absorb the carbon billowing from its chimney. That plan turned out to be implausible. Scientists calculated that, to absorb the carbon the facility would pump out in its life span, the company needed to plant some fifty-two million trees—an impossibility in densely populated Connecticut.” But then an executive elsewhere “had an inspiration: since the atmosphere was a global commons, why not situate the forest elsewhere? The company eventually paid for forty thousand farmers to plant trees in the mountains of Guatemala. It cost just two million dollars—pennies per ton of carbon.” The idea caught on, and, a “decade later, the concept of carbon offsetting was enshrined in international law.”
Carbon offsets are the subject of a new disclosure law passed by the legislature in California and signed by the Governor this month. As discussed in this new Cooley Alert, the Voluntary Carbon Market Disclosures Act will impose new disclosure obligations on entities that market or sell voluntary carbon offsets within California as well as on entities that purchase or use voluntary carbon offsets and make climate-related claims. Importantly, in addition to offset-related disclosure, under the Act, new disclosure obligations will be imposed on entities—public or private—that make claims regarding the climate performance, carbon neutrality or climate goals of their businesses or individual products, so long as they operate and make claims in California. Accordingly, the Alert advises, the Act could have very broad application. Disclosure must be published on company websites and updated at least annually. The disclosure requirements “take effect on January 1, 2024, requiring covered companies to act quickly to prepare relevant disclosure.” Check out the Alert!